- With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. Once you sign on the dotted line for this type of auto loan, you're obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan.
Related Terms and Acronyms
- Accrued Interest — Definition,
- Interest which has already been earned but has not yet been paid.
- Amortization — Definition,
- Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
- Amortization Schedule — Definition,
- A detailed table showing the amortization of a loan which includes the beginning principal amount, period payments, the interest portion of each payment, the principal reduction portion each payment, and the ending balance. The Canadian Equity Group has developed a mortgage rate calculator which will generate a perfect example of an amortization schedule.
- Amortization Table — Definition,
- A mathematical formula used to calculate monthly mortgage payments based on the borrowed loan amount, the interest rate, and the loan term.
- Interest (int, IN) — Acronym & Abbreviation,
➥ Bank account transaction code.
- Money paid for the use of borrowed funds, usually expressed as an annual percentage.
- Interest Adjustment Date — Definition,
- The date one month prior to the beginning of amortization when accrued interest computed on the monies advanced becomes due.
- Interest Rate (IR) — Acronym, Very Important,
- The rate a lender charges an individual to borrow money.
- Loan — Definition,
- Letting another party use something of value temporarily.
- Principal — Definition,
- The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
- Term — Definition,
- The length of time you commit to repay a lender or bank at an agreed upon interest rate and payment schedule. The interest rate usually remains constant during this term unless the commitment states otherwise. For example, a five year fixed rate mortgage has a term of five years.